Stock bp vs options bp

What Is Stock Buying Power? Put simply, your buying power is the maximum amount of money (capital) you have.
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Making profitable adjustments to your stock portfolio can be tough. Learn more about three important metrics you can use to manage your investments. If stocks crash, bonds might go up, and vice versa. And cash will just stay cash. You make adjustments to the percentages depending on your market outlook.

Maybe you do that every month, or every quarter, or less often.


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And you think you and your portfolio are set. But then, correlation happens. Think back to , when stock prices crashed.

BP's neutrality makes it a prime candidate for cash flow strategies

Bonds moved up initially as stocks dropped, but then bonds dropped, too. Sure, you could have sold bonds when they peaked and reallocated into cash, but who has that foresight? Being able to catch the right side of big moves can be as much a matter of luck as skill.

A trader might have an approach that adds agility to her portfolio. Rather, analyze what a trader does so you become a more informed investor. Like an investor, a trader will look at the total beta-weighted delta of her portfolio to assess overall risk. Say you have shares each of various stocks.

It’s Great to Have Funds

A trader might decrease the deltas in FAHN by selling some shares, buying a collar buy a protective put, sell a covered call , or selling covered calls. Or she might increase the deltas in GVRC by buying shares or shorting puts. Having relatively balanced beta-weighted deltas could help diversify your positions and potentially reduce unsystematic risk. To execute a trade, you need a certain amount of capital i.

BP PLC ADR

How much capital you need depends on the trade s and type of account you have. Some trades in certain underlying stocks have bigger capital requirements. Some have less. Explore how much capital an individual position requires on the Position Statement section of the Monitor tab on the thinkorswim platform. Analyze the buying power effect of your positions so you know which may use more capital than others. For illustrative purposes only. Return on capital is a way to think about how much a trade could potentially make relative to its capital requirements.

In an options trade, theta is how much total credit you receive less transaction costs positive theta or the debit you paid negative theta over time, all things being equal. Because time is constant, looking at return on capital based on theta can help you balance positions as you might for delta and capital requirements. Is it a perfect metric?

But it lets you compare apples to apples, like beta-weighted delta. But unlike deltas, which need to be beta-weighted before you can add them together for your portfolio, you can simply add the theta of individual positions together to get a total theta. One day passing is the same for every position, and theta is expressed as the dollar change in value, per one day passing. She may prefer to earn a certain percentage of her capital—say 0.

But she can possibly reduce her capital requirement by turning it into a short put vertical. To build a short-put vertical out of an existing short put, she needs to buy a further OTM put. But which one? Look at the theta of your short put.

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Customize the settings on your option chain from the Layout dropdown to view the theta of calls and puts. Yes, your potential profit is smaller. Calculating your buying power can be tricky, and it gets trickier with more complex contest rules. This will be a quick primer on how to see exactly how your buying power is calculated, what affects it, and how to recover it when you want to make more purchases. Your buying power is the money you have available to use to purchase securities.

It is NOT your cash balance. Each of these items will affect your buying power differently.

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You can review the rules for your contest on your Account Balances page, on the right side:. If your contest does not allow short selling or day trading, your buying power will be easy to calculate:. If you have very low buying power, but lots of cash, chances are you have a big order sitting open. You can either wait for it to execute, or you can cancel the order to get your buying power back immediately.

You can see open orders on your Order History page:. If your contest allows short selling, the mechanics work a bit differently. In real life, you cannot short sell without a margin account, but since we allow it here, this is the formula used to calculate your buying power:.


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